Procter & Gamble used its fourth-quarter results to warn that it is facing a $2bn hit from rising commodity and transport costs caused by pandemic-related disruption. And the company said that further price increases and cost cuts will be used to cushion the impact on margins.
Other companies in the sector, including Unilever, Nestlé, PepsiCo, and Reckitt have issued similar warnings in recent weeks. P&G, which named a new CEO last week, hiked prices in emerging markets and on some products in the US earlier this year. Its CFO Andre Schulten said on Friday that the company still faced significant input costs across most of its commodity basket, with pulp, resin and polypropylene being some of the top drivers.
The company also expects a $100m higher transportation bill this year, mainly in the US, where a driver shortage is causing disruptions.
P&G’s sales during the pandemic period have been boosted by people spending more time at home eating its food brands and using its cleaning products.
During its fourth-quarter to the end of June, net sales rose 7% to $18.9bn. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 4% driven by a 1% increase in shipment volume, a 1% increase in pricing, and a positive mix impact of 1%.
The company said the volume increase was driven by innovation, partially offset by tough comparatives in certain markets and categories with last year due to pandemic-related consumption increases.
P&G’s Health Care unit was the star performer with a 14% organic sales increase during the quarter, driven by new products in oral care and personal health care. The Beauty and Grooming division both grew 6%, whilst Fabric & Home Care increased 2%.
For the year as a whole, organic sales increased 6% after a particularly strong performance during the height of the pandemic. The company expects this figure to slow to a 2% to 4% rise in the year ahead as more normal trading conditions return.
David Taylor, who will step down from the CEO role at the end of October, said: “We delivered another year of strong results with balanced top and bottom-line growth and strong cash generation, exceeding each of our in-going targets. We built strong momentum prior to the pandemic and have strengthened our position further.
“As we look forward to fiscal 2022, we expect to continue to grow top-line and bottom-line and to deliver another year of strong cash return to shareholders despite a challenging cost and operating environment.”
NAM Implications:
- Still think shelf-price inflation will be limited to the CPI 2.5%?
- It’s all about consumer perception of ‘pound-in-the-pocket’ inflation.
